The "you are stupid" sentiment comes from this statement: "like moths for bad ideas." To come up with stupid ideas is one thing but to have a natural disposition towards bad ideas is perhaps the definition of stupid. I partly sympathize with the team because it sounds like they were desperate, or at least acting that way. When that happens, rationality fails and your criteria for ideas gets too relaxed and your guiding motivation is to do what's easy and relevant for the most people rather than perhaps providing significant value to a smaller group. The latter is much harder since you are engaging with people you won't be as comfortable with compared to "your mother".

I didn't interpret it as "you are stupid." It's actually surprisingly common for first-time founders, even smart ones, to have terrible startup ideas.

It takes time to develop good judgement. Many ideas that seem initially appealing turn out to be tarpits that ensnare founder after founder. And some ideas that seem crazy at first are actually good. And many ideas are bad initially, but "ripen" as technology changes.

For example, WebVan was a huge failure 12 years ago. But today Instacart is providing a very similar service, but in today's context they can do it without burning tons of capital.

Part of the benefit of YC is that they see so many startups that they can develop keen intuition into which ideas are most likely to work. Not perfect intuition. But definitely better than the average first-time founder.